With the latest Silverlight bits you will find a new configuration tool in the Silverlight application folder (i.e. c:\Program Files\Microsoft Silverlight) names slup.exe (SilverLight UPdate?). You can open the configuration from any Silverlight host, too, by right-clicking on the host control and click on Silverlight Configuration.
On the second tab you can configure how you would like to get the Silverlight plugin updated:
The value will be stored in the registry: HKCU\Software\Microsoft\Silverlight\UpdateMode (REG_DWORD)
0 = install updates automatically
1 = check only
2 = never check
slconfig.exe instead of slup.exe
Hopefully the name of the file will be renamed from slup.exe (which seems to only configure the update behaviour) to slconfig.exe (which could configure more settings like storage space for IsolatedStorage,...). I think there will be a set of configurations in the future that user configurable. Plugins like Google Gears or Adobe Flash have their own configurations, too.
How Silverlight update works (Update)
Christoph is writing about how Silverlight update works internal, when the plugin tries to update itself or check for feature updates.